Synthomer plc

Good morning and welcome to our 2026 first half results presentation. I am here with Ian Torrance who joined us in May as interim CFO and who some of you will already know and Faisal Taba, head of investor relations and together we look forward to answering your questions at the end. In terms of the agenda, I will provide an overview of our strong performance and the further strategic progress we made in the first half. Ian will then walk through the numbers in more detail before I come back to present the strategic actions we have been taking in line with our sustained efforts to become a more specialty focused business. Then at the end we will discuss what we expect for the remainder of the year. So let me begin with the highlights and the five headline points that frame our first half performance and the strategic context in which it was delivered. Against the backdrop of a market environment which remained complex to navigate, we delivered a first-half performance that was ahead of expectations. Our revenue grew 5% in constant currency, EBITDA rose 13%, EBIT was up 36% alongside gross margin expansion of nearly 200 basis points and EBITDA margin improvement of 80 basis points to a remarkable 10.1%. This is a strong set of numbers and reflects the compounding effect of the strategic and operational actions we have taken over the past few years and that we have continued to execute with determination and discipline. Our progress in the first half was primarily driven by consistent strategy delivery and self help. Innovative new products and accessing new markets are an important part of our strategy. In the period, this included positive developments in intermescent coatings for data centres, additives for onshore oil and gas drilling, medical adhesives and non-woven fabrics. We have also focused on increasing our global reach with good regional growth in China, the US and the Middle East. All three divisions generated volume and revenue growth in the period. In addition to self-generated growth and ongoing cost savings, we also anticipated our performance would reflect some expected cost headwinds, as we identified at the start of the year. Net of Rage Inflation and Bonus Normalization all divisions increased EDBA margins in the period. in all but especially in difficult or uncertain times it is important to have a strong business model and from this perspective we are increasingly well positioned you have robust supply chains world-class global procurement capabilities a focus in region for region manufacturing footprints and differentiated specialty products with real pricing power These underlying strengths of our business model put us in a robust position to continue to support our customers through a lower demand environment and through the recent dislocation in global chemical value chains. And in some areas, most notably the MDR business, we experienced meaningful increases in activity during Q2 as some of our competitors found it challenging to fulfill supply commitments. is one of gains we are not currently forecasting to recur in H2. My fourth point, we continue to execute our strategy with consistency. Throughout all the geopolitical and market disruption and uncertainties, this remains our guide. Our successful debt refinancing in April has ensured we have a stable financial platform to continue to transform the business and the runway to execute our plans. As part of this, we made further progress in our program of non-core-based chemical divestment. In June, we announced the divestment of acrylic monomers, removing a capital-intensive and cyclical upstream-based chemicals business that diluted margins and cash conversion. In addition, we have three further divestment projects underway to enhance our strategic specialty focus and capital efficiency, or put simply, to reduce net debt. My final point before I turn over to Ian, we are today raising our outlook for the full year. With a strong first half driven mainly by recovering strategic progress and cost savings, which we expect to continue into the second half, we now expect to deliver a full year 2026 performance ahead of current market expectations and well ahead of previous year. This and our ongoing cash discipline also supports our expectations of improved free cash flow delivery and faster deleveraging over the course of the year. I will return to discuss strategic progress and the outlook in more detail. But let me now hand over to Ian to walk you through the numbers.

Many thanks Michael and good morning. As Michael has already covered, the first half of 2026 has seen a strong performance by the group. with our focus on speciality growth, the strength of our regional manufacturing model and excellent procurement function underpinning 13% EBITDA growth and an 80 basis point improvement in our EBITDA margin. Let me start in slide 6 by reminding you that at the end of June we agreed terms to sell the Accolade Monomers business in the Czech Republic with the transaction expected to close at the end of September. Therefore, in line with IFRS, this business has been treated as discontinued for the purposes of the H1 results, eliminating the prior year losses and increasing the half-year 25 EBITDA comparator for the business to 83.1 million. One of the key consequences of this change is that it masks the 5 million improvement the team has delivered in that business. Including this improvement, EBITDA grew more than 20% in H1 It is testament to the skills of the team that we've been able to deliver a step change in the business's operational efficiency enabling it to capture favourable market conditions and to get set up for the years ahead where Syntema will benefit from a share of any excess cash generation. Focusing on the continuing business we saw revenues increase by 6.7% on a reported basis to 954 million. On a constant currency basis Weakness in the Euro and Malaysian Ringgit and a stronger US dollar relative to the pound led to 5.1% growth with all three divisions ahead. Volumes increased across all three divisions with overall volumes up 2.3% on the prior year, led by a strong performance in accessing long-term growth opportunities in CCS. and the health and protection business benefiting from its ability to support customers amid the market disruptions created by the armenian conflict the business as a whole was fast and bold in passing through increased raw material prices in q2 to customers and together with the growth in the more specialist high margin elements of our tribute to a further 2.8 percent to growth in revenue In total, EBITDA of the continuing business has increased by £14 million versus the prior period, which is after taking account of both wage inflation and the need to normalise our bonus accrual, as previously mentioned. We have attempted to break down the components of that growth and whilst it is difficult to be precise, I would estimate that around £8 million is recurring in nature. including the growth we've seen in some of our more specialist products like intumescent coatings used in data centres, energy solutions used in oil and gas grilling, and the action taken to manage costs. The remaining 6 million I would attribute more directly to the market disruptions seen in Q2, which we are not currently forecasting will continue into H2. Going further down the income statement, EBIT increased by almost 42%, with depreciation down slightly and after taking account of both the stronger performance by acrylic monomers and the higher finance costs we saw total group pvt increased by 11.4 million to 12.7 million pounds special items in operating profit were 7 million higher in the period reflecting a net cost of 36.4 million the movement principally reflecting a non-cash triop of past pension service costs due to late retirees in our US scheme. For the full year, I would expect that special items will be in the range 60 to 65 million pounds, two thirds of which relate to the amortisation of acquired intangibles. EPS benefits from an H1 tax credit, which will largely reverse in the second half. And finally, net debt was 671 million pounds, at the end of June slightly better than expected which I will cover in more detail later in the presentation turning now to the divisions starting the CCS in slide 7 CCS saw robust earnings in growth in the period as a number of the long-term strategic and commercial initiatives contributed to our journey towards a more specialist product mix revenue for CCS was up 8 million pounds Representing headline growth of 7.5%, 5.8% on a constant currency basis Volume grew 2.5% year-on-year, led by intermescent and other high performance codings used in data centres and other industrial applications A strong performance by energy solutions and a return to growth in construction, particularly in Asia while decorative coatings and consumer material volumes contracted slightly in the period. On a regional basis, both Asia and the US performed strongly, reflecting recent management changes in Americas. H1 saw the CCS gross margin continue to strengthen as the shift towards speciality products improved the portfolio price-volume mix and steps were taken in late Q1 to proactively respond to market conditions to increase prices. optimised plant loadings and leveraged central procurement services. These factors together with continued focus on costs resulted in EBITDA increasing by 33% to £46 million and the margin expanded by 220 basis points to 11.5%. Turning to the adhesive solutions division on slide 8 which grew revenue by 2.6% in constant currency as the combination of volumes increasing by 0.9% and the pass-through of higher raw material prices in Q2 was partially offset by an increased percentage of base chemicals in the mix. Geographically we saw growth in all three regions with Asia and China leading the pack followed by the US with packaging and towers the leading end markets. Whilst overall market demand remained relatively subdued in the period we are particularly pleased with the volume growth in our sustainability offerings and how the business is harnessing our china innovation center to drive domestic growth notwithstanding the intermittent reliability issues experienced during h1 at our facilities in texas and the netherlands the business benefited in early q2 from a number of asian competitors temporarily implementing force majeure as a result the product mix in h1 is slightly more skewed than normal towards base products the division continues to make further savings from the transformation initiated in 2023 and is on course to achieve 40 million pounds of annualized benefits by the end of this year with the target remaining to achieve 43 million pounds plus taking account of these savings and the other progress on a constant currency basis the eva da from AS increased by 4.5% year-on-year to £36.7 million with a margin expanded by 20 basis points to 12.1%. Turning to the third division HPPM on slide 9. On a continuing basis the division as a whole delivered revenue of £249 million in H1 of 11.7% on the prior year. as the health and protection business in particular benefited from its market-leading position during the recent supply-side disruptions in Asia with EBITDA for the division growing 13.7% on a reported basis to £24.9 million and the margin expanded by 20 basis points to 10%. Turning to the individual components of HPPM the health and protection business and its combination of standalone manufacturing facilities in malaysia and italy coupled with the group's global sourcing capabilities proved to be uniquely placed to capitalize on recent market disruptions volume increased 13.5 percent year-on-year with significant volatility in both raw materials and finished good pricing being a feature of both april and may looking forward as prices have somewhat normalized we are not currently forecasting for the performance even q2 to continue into the second half However, the health and protection leadership team continued to explore opportunities to exploit our market leading capabilities in NBR manufacturing and support customers in the development of innovative, thinner and reusable gloves. Conditions across the rest of the division's portfolio were more mixed. Volumes for the continuing performance materials businesses fell by 5% year on year, principally from weaker demand. in certain foam products and speciality vinyl polymers both partly also to do with conflict disruption however the combination of raw material prices and mix led to increased revenues overall and we continue to focus intensively on process optimization and cost efficiency throughout this division i want to turn next to the balance sheet slide 10. as reported at the year end we completed the refinancing of our core debt facility on the 30th of April and today have approximately 680 million pounds of bank and UKIP facilities which mature in February 2029 and euros 350 million of bonds that mature in July 2029 at the 30th of June total borrowings against these facilities was 874 million pounds with a net debt standing at 671 million which on a covenant basis resulted in leverage of 4.9x as a reminder under the terms of our new facilities the year-end covenant requirement is now 6.25 times and the first quarterly covenant on the 30th September is higher than that so our headroom is significant and we had nearly 270 million pounds in committed liquidity as Michael mentioned this gives us a robust financial platform and the runway to focus on completing our overall disposal program which will help to reduce gross debt levels and support our medium term target to bring the leverage back below two times as part of our capital structure we use non-recourse receivable financing often called factoring to both diversify our sources of finance and also reduce cost At the prior year end we benefited from a £50 million one-off arrangement with KLK and also utilised around £115 million of non-recourse facilities provided by banks. The KLK purchase arrangement was fully repaid in Q1. At 30 June bank factoring was circa £150 million. So overall we reduced net factoring usage which reduces our operating cash flow by £15 million in the period. Turning finally to cash flow and our year end expectations for leverage on slide 11. As a result of significant increases in raw material prices and the normal seasonality in our business, the usual H1 net working capital outflow was higher than last year at £90 million, partially offset by a reduction of 8% in inventory volumes since the year end as we continue to manage our stock levels. As seen in previous years, this seasonal outflow will reverse in the second half, especially assuming raw material prices moderate, as we have already started to see. CapEx in H1 was £33.5 million. Of this, £9 million relates to growth initiatives, £5 million to the rollout of the penultimate wave of our ERP programme, and the balance is SHE and maintenance. For the full year, we continue to expect CapEx to be around £70 million, significantly less than 2025. Finance costs for the first half were £35.4 million. This was up £5.3 million on the prior year, reflecting the higher average level of drawn debt, repayment of the bond stub in July 2025 and the increased interest costs within our new facility, where the weighted average cost of debt on a cash basis is now 50 basis points higher than h1 2025 for the full year we now expect interest costs to edge up a little to around 73 to 75 million pounds in the income statement but remain around the 65 million level in terms of cash as mentioned the reduction receivables financing use reduced our free cash flow in the period whereas last year it improved it However, if we strip the receivables movements out, the underlying pre-cash flow in H126 was 66 million, only slightly higher than the 57 million outflow in H125, reflecting the higher raw material prices. Looking forward to the year end, taking the seasonal reversion working capital together with our other forecast assumptions for H2, we would expect to see the pre-cash flow for H2 significantly strengthened. On the same basis, excluding receivable financing movements, we now expect to be free cash flow positive for the year as a whole, an improvement on our expectations at the April results. Taking all of this together with the disposal of accolade monomers, which involves a diary payment of £5 to £7 million, we would expect to reduce covenant leverage to between 4 and 4.35 times by the year end. which is also ahead of our expectations at the start of the year. With that, I will pass back to Michael to discuss our strategic progress and at the end we will open the lines for Q&A.

I'm now going to take you through our strategic progress in the first half. But before I do, let me briefly remind you of the key element of the strategy which has guided and will continue to guide how we are transforming the business. All five pillars and three enablers on slide 13 provide executable actions for us. And this is our strategic direction, another slide which you will be familiar. All our plans are focused on progressively creating a business that is more specialty weighted, more geographically balanced and more streamlined. I will take you through each of our three divisions in turn to highlight the key actions we took in the first half in support of our strategy. So let's start with CCS on slide 15, our most specialty-weighted division. The strategic opportunity in CCS is compelling. We have leading positions in solutions that enhance coatings applications, energy efficiency and waterproofing in all sorts of construction. a global network in high-performance technology platforms, sustainability and regulatory tailwinds which underpin GDP Plus growth, and, maybe most important, a healthy innovation pipeline. From that position of strength, CCS is working on an increasing range of profitable growth opportunities. In the first half, that focus translated into strengthening our presence in several high-growth sub-segments. for example our volumes in intumescent coatings doubled year on year driven by demand from ai data centers and infrastructure projects and we are working with a growing number of customers in battery storage medical and filtration applications we continue to improve the geographical balance of ccs through refreshed regional growth strategies which means key account management for our top global customers and targeted marketing to new customers in north america the middle east and asia our specialty focus value selling disciplines and pricing strategies ensured prompt pass-through of high raw material cost to customers our portfolio improvements we continue to embed a more end market focus and faster speed to market innovation strategy and we are managing our manufacturing footprint through partnerships to localize production increase efficiency and be closer to our customers ongoing cost optimization measures include annualizing and further adding to the benefits of the cost reduction program initiated in 2025 continuous capacity management including temporary reallocation of people and assets and progressing further inventory management measures to enhance cash flow. Turning now to adhesive solutions. As a reminder, AS benefits from leading positions in EMEA and the Americas, deep and long-term customer relationships and a market-focused innovation pipeline with a strong sustainability angle. AS delivered a robust performance despite relatively subdued underlying market conditions driven by growth in new sustainability focused products such as specialty tapes and labels including our new climber branded lower carbon footprint products benefiting from iscc plus mass balance certification we have also made progress in new medical end markets and we are winning additional business in china our china innovation center and local partnerships are helping to localize manufacturing win additional customers and broaden our end market exposure demand for some of as-based chemical products in europe and the us also benefited from selective competitive capacity challenges during the second quarter as i mentioned our performance improvement program launched in 2023 has now delivered cumulative benefits of 40 million pounds since inception massively improving the margins in this division and we are targeting 43 million pounds or more going forward the as ebda margin of 12.1 percent in the first half compares with 5.4 percent at the time of the division's total transformation program launch three years ago a transformation that speaks for itself. As Ian mentioned, volume growth in the period would have been higher, but for continued intermittent reliability issues in the Netherlands and the Longview facility in Texas shared with Eastman, both of which are expected to be resolved in the third quarter. In fact, we are back up and running in Middleburg, Netherlands as of last week. Let's look at HPPM now, our predominantly based chemicals division. The most significant business in HPPM remains our position as market leader in the £3 billion NBR market, with hygiene and emerging market megatrends supporting approximately 6% annual growth. Elsewhere we are focused on selective attractive niches within performance materials, driven by strong customer relations, process innovation and emissions reduction. The performance of our health and protection business in the period was strongly correlated with competitors dynamics. Our strong market position, manufacturing expertise and procurement capabilities meant that H&P volumes and pricing inflected significantly upwards particularly in April and May as the Iran conflict disrupted competitors value chains. Underlying glass demand growth remains robust, but pricing and margins across the industry continue to be volatile, reflecting the changes in the supply-side environment since the pandemic. We continue to make longer-term progress through innovation in reusable glass, more complex disposables and lower carbon materials. Our foam and specialty vinyl polymer businesses experienced reduced end market demand during the second quarter in particular, while paper and carpet markets in Europe proved relatively more resilient. We maintain a continued focus on cost savings and efficiencies and we are making encouraging progress in selective innovation projects such as enhancing the circularity of the carpet value chain. As previously touched upon, we announced the divestment of our Accurate Monomer business in June, our fourth transaction since the 2022 strategy review. Achieving this important goal, which removes the highly cyclical and capital-intensive upstream business from our portfolio, was supported by the team's success in substantially reducing AM's losses from £5 million last year, H1, to almost break even this year. we will provide further updates on our ongoing broadened divestment program added advances coming now to current trading and the outlook as we have described in h1 we delivered strong progress driven primarily by sustainable strategic growth and continued self-help initiatives this has been led by new products and new markets and customers a focus on innovation Deliberate steps to strengthen our market position and targeted cost actions. We achieved this despite a substantially more complex operating and commercial environment, a testament to the speed and agility of our teams, our in-region, for-region manufacturing model, our world-class procurement capabilities and ability to pass through raw material price increases to customers. As Ian said, the majority of this was from the EBDA progress we are making from strategic growth initiatives and self-help, approximately 8 million pounds net in H1, and which we expect to continue. The reminder was from Q2 activity uplifts, mainly in base chemical product areas, principally in health and protection, that we are not currently forecasting will recur in the second half. So combining the strong H1 outturn and a broadly similar level of recurring strategic and self-help progress as we saw in the first half to the second half, the result is an upgrade to our full year outlook. This now sits slightly ahead of current market expectations for 2026. And as Ian took us through, our free cash flow expectations have also increased and we expect to reduce leverage meaningfully by this year end to between 4 and 4.35 times excluding any further divestments from 4.9 in June. So bringing all this together, our ambition is to substantially and sustainably grow earnings in the medium term and the first half of 2026 has reinforced our confidence in achieving that objective we are continuing to deliver the multi-year strategic transformation to improve the quality of our earnings and increase our operating leverage by focusing on higher margin more resilient specialty products in long-term attractive markets this is the right strategy for us We are encouraged by the new product growth and market developments achieved in the first half, with the business delivering its opportunities for sustained long-term growth in a tangible way. Of course, it was also helpful that our robust business model meant we saw some additional upside from the market disruption in Q2, but we do not count on this continuing in the outlook or in our plans. Instead, our upgraded outlook for full-year earnings and cash generation reflects the progress we are making against our strategic objectives and the operational discipline we have maintained throughout. Meanwhile, the recent refinancing and our ongoing portfolio rationalization plans provide further runway to reduce debt, which has been our most significant challenge over recent years. to wrap up the opportunity to sustainably improve the earnings power of splinter mare is becoming increasingly clear as ever it rests on three reinforcing drivers further self-help actions our continuous focus on innovation and strategic delivery and end market growth with that we are now happy to take your questions thank you very much sir

ladies and gentlemen if you'd like to ask an audio question please press star one on your tablet keep at it just make sure that your line is not muted allow you to reach your equipment let's start one for questions our first question today is something from stephanie vincent of bank of america please go ahead hi thank you very much for taking my questions so you talk about three further development projects i just wanted to know if you'd be willing

to disclose the impact in terms of reducing net debt do you actually think though that this is going to be leveraging um to symptomers credit profile and in terms of you said that in adhesive solutions that there were some reliability challenges in the netherlands as well as your hosted site in texas just wanting to know um is that going to be able to be recouped in the second half of 2026 and how much ebda impact or revenue impact do you think was was um was achieved during this this period so we kind of know the the impact of that and that's it for me thank you very much stephanie

on your first question the divestment we have four processes right now underway number one is accurate monomers which you announced the signing we are still fully on track to close it by the end of september 30th of september so this should be done and that is not the leveraging effect that is more p and l effect because as you know we lost 10 million last year Then we have two processes in due diligence phase over the next coming few months. We hope that we can come to a signing. As I said, due diligence, you know these days it's more complicated. It takes longer time to do diligence than in the old days, but it's a strict process. We are talking to several interested parties, and we are very confident that we have news in the next few months. Again, due diligence phase. One process which we launched just recently, we expect non-binding offers in September of this year, and this will obviously then take a little bit longer, but also it's a formal process. We have very nice inbound interest, as I just saw this morning, and we will take it from there. Again, as I said, September non-binding offers. So altogether, our assumption is that we can get 150 to 200 million pounds of proceeds which obviously would be a massive deleveraging effect that's the number what we have said already a few months ago and I think we have no reason to deviate from this number so this take this 150 to 200 million if we are talking about deleveraging I think it's also interesting to note that you can deleverage in two ways number one is divestment I just explained and number two is to sell chemicals which it produces EBDA even last year even below 140 million now you take 140 million minus 70 million interest minus 70 million capex you don't have a lot to further the leverage now if this year we go to let's call it 165 million you take 70 and 70 away you have 25 million left then for next year you have less interest because you have a lower leverage so that could take another 10 million down you probably have 10 20 million more ebda and you have lower capex because in the capex situation we had last year we had 86 million this year we have 70 million as ian mentioned before we have our erp system that is phasing out so you can take there about 10 million away we have some capex drugger such as acryl molymers will be out of the books so suddenly this 25 30 million becomes 75 80 million and then it becomes an interesting part to deleverage the company. I think these are the two levers that we have to deleverage and so far we were mainly focused on the divestments because as I said the EBITDA didn't leave too much of cash available but I think this situation is changing and I think we showed quite impressively in the first half how this can go and also how fast it can go. On your second question, AS reliability, It is unfortunate, but we did have some occurrences again. I mentioned Middleburg. Middleburg is up and running again, but we did lose probably something in the neighborhood of 10 million euros on gross margin level, which we lost in the first half. You have to bear in mind, as annoying it is for ourselves especially, but these are big, big assets in Longview and in Middleburg. And these assets, they have a multi-year program to rectify and to change certain items. You talk here very granular, very, very simple mechanical things such as tubes. We are going to refurbish them. We are going to change them. That's what we did the last two years. That's why everything got much better last year. And this year, there was nothing else than these two events. But it did cost us money. As I said, it's fixed in Middleburg for sure. also in long view we are on the right track these are intermittent things you cannot think you know this is not stopping the whole site these are certain intermittent troubles in one plant is one week out and then it comes back again but again it did cost us money so as i always say the problem of today is the upside of tomorrow but i think for the second half we are very confident that this will not reoccur again yeah

Thank you very much. If I can just ask one more question about the phasing of volume increases and restocking with the Iran conflict. If we go back to March, April versus May, June, you know, if the March, April sort of cadence continue, how much do you think just generally is

volumes would have been up for your business i'm just interested to see the restocking de-stocking impact of all this volatility if you see what i mean i can start definitely maybe ian would would add a bit i think it's less the volumes you see that our growth was only 2.3 percent so it's less the volumes but the margin helped us and as we said in the present in the presentation it was predominantly the base chemical areas such as ndr as the most prominent ones So the margins there, if we can be very tangible on this, the margin in January and February was on NBR. It was $180 per ton, went up to $600, and it's down now to $250 to $300. I think this gives you a pretty good feeling where we were, where the conflict at the peak, when really our Korean, especially competitors, had a problem on the supply side, and now it's going down and we believe that this is for the foreseeable future now, kind of the proper level, this 180, 600, 250 to 300. I think this gives you a bit of an idea. Maybe one more thought on your previous question about Longview in Texas, the shared site with Eastman. We are implementing now, as we speak, a little bit the new operating model there, which I think will help us a lot. that we become more independent and we take certain functions such as engineering and other kind of less operating functions in the site we will take in our hands we change the business model we do it ourselves rather than Eastman does it for us I think this should be a very very good situation going forward because logically we have more interest more capability it's our business and we should take more care of it rather than we kind of outsource it to Eastman

nothing against Eastman it's a great relationship that we have on the site but I think if we have the faith let's say in our own hands I think this should also improve the situation there that's great thank you very much the only thing I would add to that is I think if you look where the growth came from particularly in CCS it was in the coatings speciality coatings which weren't really driven by what happened in Iran and also the energy products I think those more innovative, more speciality products really were some of the tailwinds that came through the business and we expect to continue through the balance of this year. We had a short period of time when some of our competitors were under force majeure but that was a defined period of time end of March into April so again I think we look at those as very time blocks and therefore not necessarily ever going to extend through time.

Thank you very much. Thank you. Thank you.

thank you what your questions are Stephanie we'll be taking questions now from Harry Phillips of Peel Hunt please go ahead that your line is open good morning everyone um three from myself please just in just continuing on the Iran theme just to be maybe unduly pessimistic um is there a situation where that's actually might get a reversal in the second half and therefore that six million goes nets out totally for the year let alone um no recurring feature through the balance of this year into next year the second is just on factoring where broadly speaking you're 150 million i'm guessing given the sort of circumstances around the klk situation back in the last year that's sort of pretty much as far as you can go albeit i know you've got a 200 million facility but it's had as far as it goes and that sort of we get some back in the second half and then finally the scopes of further restructuring um sort of moving forward if you like as the sort of new symptomer emerges and then what sort of impact does that have around

drop throughs going forward I mean I've got in mind sort of late 20 drop throughs as we go forward and how that might progress notwithstanding disposals but again as the sort of new symptomer starts to mature yeah thank you I think I take Harry your first question your third one and Ian probably takes the second one on the Iran reverse that's a short answer we don't think that it will reverse I think the six million are ours and we will not give them away again I think it is prudent for us not to plan for more, even though we all know that the situation in Iran is anything but resolved. I think supply chains kind of reorganized themselves a little bit, so it's probably not a big benefit, but if anything in the second half, it's more a slight benefit rather than that we have to give it back. I go with the third question on restructuring. You know, we said already in October 2022 that we are going to divest more than one-third of our business that we want to become a clean also with a different rating than a clean specialty chemicals company we are about 60% through this and we will get the last three divestments done or actually the two of them that really cater for the base chemical situation so we will get them done we will definitely have some stranded costs but these are stranded costs they are not huge you talk here about n single early double digit millions after we have done four or three closed transactions it's clear that we are pretty good in reducing stranded costs i wouldn't worry too much about the stranded cost you will not eliminate them immediately it will take you one or two years but you will get them down to pretty much that it becomes a zero effect i think stranded costs that should be under control also bearing in mind that the assets that we are selling they're pretty much isolated so you don't have a lot of internal agreements and white lines between plants and so on these are standalone businesses you see it now Sokolov that's one site in the Czech Republic and the other asset is the same that concerns another three assets which are standalone assets I think then if you go forward the drop through rate or we call it operating leverage is clearly and you can see it in the results of this half year is clearly more than 30% so I think this is the attractive part because we took so much cost out in the past and we increased our margin and probably in the whole statement that you were reading this morning the number I maybe like the best is that we had since four years an uplift in gross margin of 600% and that's a totally different new world and this shows you that we are really becoming specialty chemicals so the dilution effect if those dilutors then are gone I think it's massive and that's why also you can see that now we produce an ebda of 10.1 percent 10.1 percent i know some people in 22 when we presented the strategy at about six percent ebda and i said that we can go up to 15 percent some people didn't believe it but now you see a ccs division and an as division there are 12 percent 11.5 and 12.1 percent ebda i think there's another one and a half percent in there I think my 15% at the time suddenly become very realistic and that will be then the profile of the symptomatic going forward so I think everything that's like last operating leverage is so important that's why last year's results were okay but they were definitely not where we wanted them to be because we have 7% less volumes and then operating leverage goes the wrong way around now this year we have just a slight volume increase but you see the drop through rate i think is quite impressive but i think that's how i see a bit this situation i think it's also interesting that when we are then when the last two base chemical businesses are gone you have a very clean situation how to run the company and there is a lot of cost of complexity in our pillar for the differentiated steering that costs you money in a way and it costs you efforts And if you can focus and you can run a fully specialty model, you can reduce costs, you have less complexity, and you have more focus. I think that's the target which gives you additional benefits then on top of the 30% operating leverage that we have right now.

Ian, would you make the factoring? Yeah, on factoring, I think maybe it's worth standing back and just recapping how we think about it. So at the end of last year, we had 165 total factorings 115 from banks 50 from klk and that klk facility was repaid in the early part of the year when we think about factoring we think well on the basis of diversifying the sources of funding available to the group and also cost as you rightly say there's a 200 million euro facility available from our existing banks there's no reason that that couldn't be extended modestly And if we look at the size of the receivable book we have, then we have headroom to factor more receivables should we decide to do that. But the most important bit, I think, is to look at what's it cost and also not to tie it up with the free cash flow numbers. And we've shown free cash flow numbers this time round, which exclude the impact of factoring. clearly as a as you reduce or increase factoring it has an impact on the presented operating cash flow and that was a 15 million outflow in each one so 105 of gross outflow at the free brings you down to ultimately 80 negative free cash flow take off the 15 that relates to reducing the receivable block you to 66 million or free cash flow outflow and

in h1 and that's comparable to last year so sort of up 15 percent does that answer the question factoring in an environment where we have massively higher raw material cost which obviously gives you much more reserves you have more sales we didn't do a lot of stretch in june compared to december so that's an impact on the payables and the most management controlled item on networking capital is inventory and inventory is flat compared to last year in December and actually if you take it in days it's significantly down but I think we have a lot of room here to play on the cash flow and I agree that face value of minus 80 million outflow is not ideal but I think if you put it a little bit more granular including the factoring including the network capital as I explained the inventory piece the payables piece the receivables piece I think you come into a totally different situation and that's why we are also very much sure that we can produce free cash flow except the factoring moves in the second half and for the whole year. And at the end it all ends up in something which you haven't heard from Sintema in a long time that we are anticipating a near end leverage between 4 and 4.35. I remind you the last year we had a reported leverage of 4.75 if you take the 50 million from klk away it would have been 5.2 so within one year leverage reduction from 5.2 like for like to if you go in the middle 4.15 4.2 of our range i think that is rather significant and that brings me then back to the point i made to stephanie and then you make that calculation of significant epda minus reduced interest minus reduced capex and suddenly you have a meaningful deleveraging effect from uh from selling chemicals at the end of the day so i think this is a pretty nice uh path forward for us that's fabulous thank you very much indeed thank you sir the next question will be coming from kevin forgerty of doji news please go ahead you guys open sir

great thanks very much uh thanks for taking my questions um actually well done on the on the half good uh good outturn um just wondered if you could put a bit more clarity on ccs and just the sort of you know the impact of some of those specialist um product areas you called out um particularly sort of your data center applications etc just you know just sort of to help us kind of build what contribution they had what the pricing differential might be um i guess energy we can see how much the portfolio that is but perhaps some of the other other areas to uh just you know help us get comfortable with the contribution i guess they've made in the uh in the half um just a second question in terms of exceptionals for the second half of the year given what you said you know your outlook

what you're likely to sort of get on with and portfolio transformation etc is there any number you could sort of help us with just in terms of like the exceptional wrong rate in uh in h2 yeah on this cc i can even answer the second one question i think there are very limited exceptions that we are planning but ian is looking into it but i think it is it's pretty much neglect and neglectable but uh on your ccs questions look this data centers we always had a very strong construction business and this year in the first half is even better that has basically two reasons partially coatings partially construction it's in asia it is very strong and it's strong in the us predominantly and that links a lot into the data centers the data center applications are new for us because there's a huge boom in construction this i think we all if you look at market reports this will go for another few years and we have a very good position there the impact is significant it definitely explains a portion of the delta the positive delta and ccs division and as i said we expect this to continue going forward these are very specialist applications and not every company can do it i think a truly specialty chemical company like us we put a lot of innovation behind it we have close customer relations to those data center providers I think that is something which makes us sure that it will continue for a while but it's not only the data centers that's the most prominent example in CCS but then you can go to consumer care which was lagging a little bit behind in the first half compared to the energy solutions business and coatings and construction but there are new non-woven applications for medical medical gowns and medical how do you say non-woven fabrics that absorbs the blood and that is something which is again it's an innovation project it's something totally new it's something we are working on and you can imagine the medical sector is quite high margin so these are true innovations in ccs i would say this one is more kind of in the in the children's feet but also this contributed to the h1 results and then the one in terms of contribution somewhere in the middle in ccs that's the onshore drilling as you know in our energy solution business the oil and gas drilling fluids is something that we know since many many years but we always develop we try to innovate we try to find new customers and it's a bit of a breakthrough what we did now over the last let's say 12 months we were always in this complicated deep sea rigs far out offshore and now we found solutions and again that's true innovation and customer centricity these are new customers these are not the good old three big these are new customers they are focused on the US and Canadian onshore drilling so for us it's new customers new application and it's true innovation work and I think this is also something which is very very encouraging somewhere in the middle as I mentioned in terms of impact in the first half but it's also something that is definitely sustainable because onshore drilling will go ahead, is well established, and as opposite to in the past, we do have a solution for it and we do have a customer base and you want for it. I think these are three very interesting developments for sustainable growth and profitable growth, especially in CCS division. Ian, do we have anything more on exceptionals?

yeah so exceptionals first half was 36.4 million for the full year 60 to 65 million pnl impact from exceptionals about two-thirds of that is amortization of intangibles so non-cash related cash outflow five to six million in the first half second half i would expect it's a little bit lower than that so again non-cash items coming through

on that exceptional or special items line so on the operational it's very very limited the biggest portion is the amortization of acquired intangibles which goes back obviously to the time when we made all this big acquisition and at the time of the purchase price allocation it was allocated there so it's a statutory item but it's not a it's not an operational item in a way cool ok that's very helpful thanks very much

Thank you, Harry.

Thank you, sir. Next question will be from Angelina Mazova, colleague from J.P. Morgan. Please go ahead.

Good morning. Thank you very much for taking my questions, and congratulations on good results for the first half. I have three questions, please. So firstly, your full year guidance seems to suggest that in the second half, year-on-year improvement will mostly be driven by self-help measures and some growth initiatives so similar to what we have seen in first half without any one-off tailwinds that we had and this brings me to two questions so first of all when you look at the month of july and maybe your current order book in q3 is this the trend that you're already seeing and that there is some deceleration visible compared to the q2 numbers and then secondly if we think a bit further forward from second half 26 so maybe an early look into 2027 how do you see the potential from the self-help measures and strategic growth initiatives contributing to 2027 appreciate this might be a bit of an early stage but if we take an early look is this the magnitude comparable to what we have seen in 26 year-on-year or is it something somewhat smaller and do you expect that the growth initiatives to become a more prominent driver as opposed to self-help measures And my third question is just on CapEx. You have confirmed the guidance this time of $70 billion for this year, which seems to be around 3% to 4% of sales. And you have also mentioned that this number could decrease somewhat just by virtue of directness. But my question is whether you think that this is a sustainable level of CapEx for the medium term? And is this a level of CapEx that you think sets Sprintomer up well to increase production as might be required if we have an improvement in the underlying environment? And is this a level of CapEx that can help minimize the reliability issues potentially in the future? And if you see the need for the CapEx to somewhat step up, then what is the level that you see as sustainable for the cycle?

thank you very much for your kind words at the beginning Angelina if I answer your question I think July we have seen as a reasonable month that's why we are putting out the numbers we are putting out now I think very much in line with our expectations August will now be a lower month as every year in August because Europe is kind of on holidays I think as of today 4th of August we are sure that's why we put up this guidance we are putting up So actually it looks pretty good, pretty reasonable. All the books are fine. We mention always the geopolitical uncertainty, which you don't know what kind of happens tomorrow. But also here we have proven that when things happen and rather dramatic things happen, like on the 28th of February, that we are really, as Ian mentioned, bold and fast to react to situations. I think I'm quite comfortable here that we are having a few good months ahead of us. Looking further into 27, it's probably not unreasonable to assume, if you think that last year we had 137, this we are guiding now to the 162, a little bit plus. You take, you can calculate it easily, you take the numbers, you take the six million away, which we call a one-time benefit. We always said on revenue level, we have H1 of 52.48. On the EBITDA level, it's more 55.45. So I think this gives you very nice indications of where we think that we could land. So if you take then a progress of some 25 million, I think for 2027, and we really, as you say, it's a bit premature, but I think a similar step forward is definitely doable, because as I mentioned, a lot of those benefits that we put in are sustainable ones, So let's see how it goes. I don't commit to any numbers. We will see closer to the end of this year where we land. But definitely our view is that we can make a good progress again. Then your CapEx questions, I mentioned it, and I think it's a very good question. You know, when is enough? What is enough and when it's not enough anymore? We have a depreciation of 96 million. This will go down with all the divestments already with acrylic monomer, which is a big site and a lot of investment went in over time, so this will go down. We guide now for 70 million this year, and I'm absolutely convinced that with 70 million you can put quite some nice growth capital behind it. We have maybe 35 million at the time, 40 million we need for she and sustenance, which includes the reliability work on AS. Here it is important, you know, there is no option that we take now, let's say 30 million and then we fix the AS site. It doesn't work like this. Because then you would have to shut down a site for one year to change everything. And obviously we don't want to do that. So you cannot buy yourself out of the problem. And that's why we designed this multi-year program, especially in Middleburg and Longview again, and this will go on for another some time piece by piece until everything is done and as I said we have now for a long time we had peace and quiet now in the first half there are these two issues came up again which we assume are rectified for the second half but you still need some and these are low mid single digit millions what you need going forward for the next probably two or three years until everything is really clean and decided on the situation where you want important I do not speak about safety safety we do everything what is needed I talk about reliability issues so I believe that when you have been down a depreciation probably of 90 85 90 million that was a 70 million you can actually do a very good job I think that's a reasonable investment rate which allows you to invest into growth as well we are not in a situation that we need now a 300 400 million new site to go into something bigger But I think with growth capex of 40 million, let's say, 40 million, I think you can achieve a lot of things. I remind you the APO investment was $8 million, $9 million. The China Innovation Center was $8 million. The CMA, Continuous Monomer Edition in Mogador in the U.S. was some $4, $5, $6 million. So that's in our industry where you can meaningfully invest into growth. what I would exclude is that we have special projects and if something comes up that requires a higher capex one project where we need 20-30 million that would be out of this scope and we will look at it and we will make the usual non-emotional calculations where is our payback when do we get our money back and that would not be included so this could always happen that if we have the funds available that we would do a bigger project if we get the proper payback and we can create proper returns on it I think that's a bit out of the system but I wouldn't exclude it because we do have our divisions do have a lot of brilliant ideas and one day one of these might land but if you take those ones out as I said I think with 70 million like for like we can invest nicely into the business including into growth Thank you very much for your answers all very clear

Thank you very much, ladies and gentlemen. Just once again, if you have any questions or follow-up questions, please press star 1. When I go to Sebastian Braid of Bear Brook. Please go ahead, sir.

Hello. Good morning, and thank you for taking my questions. I have two, please. The first is on nitrile markets. What happened in China that allowed the availability of raw material to improve so much and nitrile to come down? it's difficult to see where the country is getting the butadiene from to manufacture this and any update on rumored potential divestment of this segment is welcome and my second one is on receivables the one-off factoring arrangement of 50 million was repaid but from what i can see the total factoring utilization still stands at 150 million Why is this so high at the moment? Is it something to do about arbitraging the cost versus the revolving credit facility? And what do you think this will end up at by year end? Will it stay at 150, go up or go down a bit? Thank you.

Yeah, I think the first one, I think on NBR, the situation was really in March, middle of March, started April and May. was a very pronounced situation because mainly not the Chinese but the Korean competitors they had a problem with raw material supply what we also saw is that the Chinese they are producing butadiene and they have the largest acrylonitrile supplier is a company very well known to us in China also butadiene is available there and I think they just rectified the issue if we look at the level of problems in these two months the Koreans were most affected with a lack of feedstock then the Taiwanese then the Japanese and then the Chinese because China they have a lot of access to let's say other countries feedstock and the Chinese they have still a lot of coal to burn so I think and the Chinese are very fast I think this all together resulted that it took them maybe two months and they could they would get back into the into the game there are NBR flows coming from China into Southeast Asia sometimes the quality is not there yet but then customers might do some blending we all know that when Chinese enter an industry it takes them a while until the quality is on a top level but it always at the end after one to three years they are on a top level but I think going forward we have to calculate NBR supply coming from us as market leader together with a with a korean company i think this will go on i always say our mbr business is market leading it has critical mass i think that the chinese mbr players they will also play a role over time there's no reason why they should not only be in in glass and not in nbr having said that the big glove maker incop is focusing on the glass rather than of the mbr but there are others that might take it over so i think it's just always the same you know there's a disruption in the market and then people find ways it's like the water that that flows always down somehow so that's why this situation normalized again but sebastian i think it is important to say my example that i made at the beginning that The margins and it's a quite a good proxy for the whole business because the volumes do not have such swings. The margin is now somewhere clearly below the peak months in April and May but it is still higher than end of last year and early this year. I think that's the situation which we think is going to go forward. You hint at the divestment comment. I can only say what I always say. NBR is a very well managed very good market leading position based business and our strategy is a specialty strategy so I think at one point it's clear what we are anticipating and maybe the receivables question I guess on receivables I'd start with the free cash flow impact so if we ignore the receivables finance and the way we think about receivables finance is

it's a different source of capital and it's cheaper than going to the bond market and the bank market for the business today so if we take out the 15 million outflow in the first half we're back to a free cash flow negative of 66 million in each one we've said today we expect that to be positive by the end of the year and part of that seasonality but a big part of it is what's happened in raw material prices and they of course push up inventory in monetary terms underlying inventory was down by 8% on a volume basis Michael referenced it as well in terms of inventory days so underlying real actions being taken to manage working capital the receivables in pound terms again increase because of that higher price being charged through to clients and we get some benefit on the payable side so networking capital increased in H1 When we look at factoring, of course, we're now factoring more valuable invoices, which in part contributes into the face value you're saying. Looking out to the year end, we've given some guidance around leverage, and we said between 4 and 4.35 times. You put that together with a reduction in terms of, you know, improving the pre-cash flow to break even for the year, I think that will guide you into the low 600s in terms of where we expect debt for the full year to land. Absolute amount of factoring at the end of day comes down to the level of availability of invoices. We have a 200 million euro line and actually does it make commercial sense to factor versus borrow under the bank facilities and today it makes commercial sense so I would expect we continue to use that.

but continue to talk about free cash flow excluding it excluding that impact that's helpful so just to clarify we have at the moment a covenant net debt and a factoring amount and the factoring amount separate to that is the 150 and the factoring amount is excluded from the free cash flow guidance which is for roughly break even at the end of the year but it might still go up for day-to-day trading reasons by the end of the year. Is that fair?

Implicit in our free cash flow guidance is the guidance we're providing around EBITDA for the year and our assumptions in particular around raw materials. So if raw material prices remain elevated then arguably that would be a positive to the business but it could be a negative to working capital and therefore of course flow through into debt.

but we foresee a positive free cash flow our expectation is a positive free cash flow that's helpful thank you for taking my questions there is just just in terms of the level of activity at year end there is just inherently you know less to factor at december than there would be a june in a in the volume sense which may also have you know net net a potential for reducing the overall absolute amount of factoring at that point but again it's hugely dependent on raw material processes at the time that's helpful thank you thank you sebastian thank you sebastian as we have no further audio questions at this time i'll turn the call back over to host for any additional or close your remarks thank you okay anything else no thank you very much for your interest everybody and have a good day thank you